Earnings results often indicate what direction a company will take in the months ahead. With Q2 behind us, let’s have a look at Methode Electronics (NYSE: MEI) and its peers.
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
The 13 electrical systems stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 2.8% while next quarter’s revenue guidance was 2.4% below.
Thankfully, share prices of the companies have been resilient as they are up 8.8% on average since the latest earnings results.
Methode Electronics (NYSE: MEI)
Founded in 1946, Methode Electronics (NYSE: MEI) is a global supplier of custom-engineered solutions for Original Equipment Manufacturers (OEMs).
Methode Electronics reported revenues of $240.5 million, down 7% year on year. This print exceeded analysts’ expectations by 10.8%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ EBITDA estimates and full-year EBITDA guidance exceeding analysts’ expectations.
Management CommentsPresident and Chief Executive Officer Jon DeGaynor said, “The Methode transformation journey made further progress in the quarter and is firmly on track, as we continued to reduce costs and improve execution. A $9 million increase in operating income on $18 million in lower sales is clear evidence of that progress. Our data center business grew again and remains on pace for a strong year. The overall business delivered strong free cash flow for the third quarter in a row, and we have now reduced our net debt by $41 million over the last three quarters.”
Interestingly, the stock is up 7.7% since reporting and currently trades at $8.07.
Is now the time to buy Methode Electronics? Access our full analysis of the earnings results here, it’s free.
Best Q2: LSI (NASDAQ: LYTS)
Enhancing commercial environments, LSI (NASDAQ: LYTS) provides lighting and display solutions for businesses and retailers.
LSI reported revenues of $155.1 million, up 20.2% year on year, outperforming analysts’ expectations by 11.6%. The business had an incredible quarter with a beat of analysts’ EPS and EBITDA estimates.
The market seems happy with the results as the stock is up 16.7% since reporting. It currently trades at $22.52.
Is now the time to buy LSI? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Whirlpool (NYSE: WHR)
Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.
Whirlpool reported revenues of $3.77 billion, down 5.4% year on year, falling short of analysts’ expectations by 3%. It was a softer quarter as it posted full-year EPS guidance missing analysts’ expectations.
As expected, the stock is down 8.2% since the results and currently trades at $89.85.
Read our full analysis of Whirlpool’s results here.
Verra Mobility (NASDAQ: VRRM)
Aiming to wrap technology and data around a historically manual and paper-based industry, Verra Mobility (NYSE: VRRM) is a leading provider of smart mobility technology to address tolls and violations, title and registration services, as well as safety and traffic enforcement.
Verra Mobility reported revenues of $236 million, up 6.1% year on year. This result beat analysts’ expectations by 1.3%. More broadly, it was a mixed quarter as it also logged a decent beat of analysts’ EBITDA estimates.
The stock is down 2.7% since reporting and currently trades at $24.23.
Read our full, actionable report on Verra Mobility here, it’s free.
Kimball Electronics (NASDAQ: KE)
Founded in 1961, Kimball Electronics (NYSE: KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.
Kimball Electronics reported revenues of $380.5 million, down 11.6% year on year. This number topped analysts’ expectations by 14.2%. It was an exceptional quarter as it also logged a beat of analysts’ EPS and EBITDA estimates.
Kimball Electronics delivered the biggest analyst estimates beat but had the slowest revenue growth among its peers. The stock is up 51.6% since reporting and currently trades at $31.84.
Read our full, actionable report on Kimball Electronics here, it’s free.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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